Executives from Starbucks, Walmart, and others have tried to cast
the compensation changes in a much more generous light, saying
they are meant to show appreciation for employees and improve
customer service.

When Walmart CEO Doug McMillon announced $2.7 billion in spending
on wages and training last year, he
told employees that it was meant to "demonstrate our
commitment to you, our associates."

"When we take a step back, it's clear to me that one of our
highest priorities must be to invest more in our people this
year," McMillon said.

Starbucks CEO Howard Schultz shared a similar sentiment in a
letter to employees this week that said the wage increases are
intended to "deepen the reservoir of trust between" Starbucks and
its employees.

"The world around us is increasingly fragile," Schultz wrote.
"But our commitment to you is not. We are in this together, and
honoring your needs is essential to Starbucks' success."

JPMorgan CEO Jamie Dimon had a similarly altruistic message on
the topic of increasing pay. In an op-ed in The New York Times,
he said he was raising the wages of tellers by as much as 62% to
battle income inequality.

While many low-level workers have applauded the changes, labor
activists have argued that the raises aren't steep enough.
Walmart and McDonald's are both in the process of pushing their
starting wages to above $10, but labor activists are fighting for
a minimum wage of at least $15.

Former McDonald's USA CEO Ed Rensi, however, said a blanket $15
minimum wage would be disastrous, especially for the restaurant
industry, where he says labor accounts for about 35% of operating
costs.

"They are going to raise prices to offset the cost of labor, and
then they are going to lose customers," Rensi told Business
Insider in an interview. "And guess what happens when they lose
customers? They fire employees because they don't need them
anymore."

Wages in the leisure-and-hospitality sector are rising faster
than the national average, increasing 4% over the prior year in
June.

As wages climb higher, companies are investing more in automation
— like digital tablets that allow customers to order and pay for
food — that would eliminate the need for some employees, he said.

"McDonald's ... is going to automate everything they can," Rensi
said. "This is survival of the fittest. They are going to do
whatever they have to do to survive."

Automation has affected the banking industry as well. Now that
consumers can deposit checks on their cellphones, a main
component of bank tellers' jobs has been eliminated.

In explaining to investors the decision to raise wages,
executives are arguing that the investment now will pay off down
the road in better customer service, which is expected to
eventually turn into more profit.

But investors appear skeptical that the investments will do so.

Walmart suffered its worst stock decline in 27 years in October
2015 after the company revealed its investments in wages would
lower operating profits by about $1.5 billion in fiscal year
2017.

The stock price has rebounded since then, up 24% since the
October announcement, but it's still down about 15% from where it
was before Walmart announced the wage investment in February
2015.

According to Walmart US President Greg Foran, however, the wage
investments are already paying off. Foran said in May that stores
are already seeing improvements to widespread issues like empty
shelves and cleanliness.

"Associates are feeling a little bit more engaged," Foran said.

The company is even seeing sales and traffic improvements, which
it said were driven in part by the investments in labor. In the
most recent quarter, Walmart's US same-store sales rose 1%,
driven by a 1.5% increase in traffic.

AP

The changes aren't going unnoticed by customers.

"Our customers continue to tell us they are happy with the
changes we're making in our stores, as evidenced by our
customer-experience scores, which rose again this quarter versus
last year," Brett Biggs, executive vice president and CFO& of
Walmart, said on a call with analysts.

McDonald's has also been seeing positive results from its labor
investments, according to the company.

McDonald's has also started allowing workers to earn up to five
days of paid vacation every year, and it invested in training by
implementing new procedures like "ask,
ask, tell" to speed up drive-thru service.

McDonald's CEO Steve Easterbrook said recently that the changes
"have resulted in lower crew turnover and higher
customer-satisfaction scores ... and we are gaining share
relative to the [fast-food] sandwich segment."

Customer-satisfaction scores were up 6% in the first quarter,
compared with the same period last year, he said.

It remains to be seen how the rising wages will affect Starbucks,
Walmart, McDonald's, JPMorgan, and others in the long term.